Schedule 8 (capital cost allowance)

Buyers and sellers meet Schedule 8 when reconciling a corporation’s asset classes to the assets in a sale. The CRA’s T2 guide says to use a separate line for each class, and that depreciable property is grouped into prescribed classes under the Income Tax Regulations. See whether you can claim a terminal loss when you sell assets for less than their tax value.

Terminal loss and recapture

The guide says a terminal loss results when all the property in a class has been disposed of and undepreciated capital cost remains, and a recapture of CCA results when the proceeds of disposition are more than the opening balance plus acquisitions, adjusted as the guide describes. It says a terminal loss is deducted from income and a recapture is added to it, and that CCA cannot be claimed on a line in either position.

What to ask

• Schedule 8 from each recent return, with the opening balance for each class
• Whether the classes match the assets named in the sale
• How the purchase price will be allocated, since proceeds drive any terminal loss or recapture